By any account, the first quarter 2017 was a disaster for the US pay TV industry. Estimates of the decline varied, but all reported more than half a million losses. Why the big increase in cord-cutting? Existing without pay TV is now viable for many people.

How big was the Q1 loss?

MoffetNathanson estimate that US pay TV operators collectively lost 762,000 video subscribers in the first quarter of 2017. This represents a big acceleration in cord-cutting, according to the company. Last year, the industry lost 1.7M subscribers, down 1.7% from 2015. The first quarter loss represents a big acceleration in cord cutting. The MoffatNathanson data suggests that there are now 97.5M pay TV subscribers in the US.

According to Informitv’s Multiscreen index, the top 10 US pay TV operators lost 559,000 subscribers. This, the company says, is equivalent to a decline of 0.63%. The top 10 operators now account for 87.93M subscriptions.

New housing starts magnifying the loss

The census bureau says that 300,000 new homes were formed in Q1 2017. Taking those into account means there was an increase in the number of homes without pay TV in the first quarter of 1M. There are now 21.3M homes that do not have pay TV, up 9M since 2010. Pay TV penetration has fallen from 88% in 2010, to 82.1% in Q1 2017. If pay TV had maintained its 2010 penetration, today there would be 105.7M pay TV home.

Why the acceleration in cord cutting?

There is no specific event in the last quarter or even the last year that we can credit for the sudden decline in pay TV subscribers. However, there has been an accumulation of factors that make it far easier for consumers to walk away from pay television.

Increasing availability of premium sports online

Any sports fan would have struggled to live without pay TV 2 years ago. All the premiere sports rights were locked up with TV channels, and few were available online with or without a pay TV subscription. Today, ESPN and Fox Sports are available in all the virtual MVPDs, along with many of the regional sports networks.

Quality scripted original shows abound online

Pay TV no longer has a lock on providing the most diverse set of quality TV content. The number of services available with quality scripted original content online has blossomed over the last 2 years. HBO Now, Starz Play, and Showtime, have joined Netflix, Amazon, and Hulu in bringing their award-winning original shows direct to consumer online. There are now 150+ SVOD services available providing content to satisfy many diverse interests.

Consumers have grown to love SVOD

The ability to watch quality TV and movies uninterrupted by commercials has seduced many viewers. The average Netflix account now consumes an hour and a quarter of video a day through the service. This is a testament to the fact that Netflix, and many other SVOD providers, are delivering great quality, consistently to millions of subscribers.

A substantial decrease in the complexity in watching on TV

The TV has been a crucial addition to the family of connected devices. Setting up a Roku or smart TV has become a simple process most people can manage. And this has led to dramatic growth in its usage. In Q3 2016, 43% of consumers had access to a connected TV and used it for an average of 528 minutes per week (1 hour and 15 minutes a day.)

There are many other factors that have contributed to the increase in cord-cutting. These include more reliable home WIFI, higher broadband speeds, new virtual MVPDs, and new SVOD features like the ability to download.

However, the biggest factor is this. As consumers review the above-inflation price hikes in their pay TV bills and wonder what to do, their own experience with online video services tells them there is, at last, a realistic alternative. Expect cord-cutting to accelerate in the coming months.

Why it matters

US pay TV suffered its greatest Q1 subscriber loss ever in 2017.

There is no single factor that has caused this sudden increase in cord-cutting.

It is an accumulation of factors that have given consumers the confidence to accept online delivery as a practical alternative to pay TV.